Nottingham Centre for Research on
Globalisation and Economic Policy (GEP)

GEP 13/05: Internet Adoption and Firm Exports in Developing Economies

Summary

This paper investigates the effect of Internet technology on how firms in developing economies access export markets - directly or via intermediaries.

Abstract

This paper investigates the effect of Internet technology on how firms access export markets - directly or via intermediaries. Empirical evidence suggests that technology diffusion is geographically localised, with spillover effects from neighbouring firms decaying quickly over short distances. To address the endogeneity of Internet adoption, I construct an instrument that captures these local network effects, by matching IP addresses to firm locations. Using a cross-section of firms in 18 developing countries I find that Internet access magnifies direct trade with no discernible effect on intermediated trade. Adopting the Internet because of local networks increases direct exports as a proportion of firm sales by 32-36%. The analysis is robust to consideration of a wide-range of potentially omitted variables.

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Authors

Jonathan Timmis

 

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Posted on Thursday 1st August 2013

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